Chancellor to shield low-income pensioners from income tax

Summarised from 3 outlets · Updated 26 Oct, 11:31 · Archive

Chancellor John Healey will introduce a new tax allowance to protect low-income pensioners when he delivers his first Budget on Wednesday. The full, flat-rate state pension is expected to increase by 3.9% to £13,036.40 a year from April, taking it above the standard £12,570 personal tax allowance. The government had already committed to not taxing people whose only income is the state pension, and the new allowance will ensure this pledge is met.

The new tax-free allowance for pensioners relying solely on the state pension is expected to rise in line with the headline pension payment for the rest of this parliament, meaning they will not pay tax until at least 2029. According to This is Money, those earning even £1 in private pension above their state pension will be excluded from the new tax rate. For these people and everyone else, the standard income tax threshold will remain at £12,570.

The scheme would cost £200 million a year by 2030, according to reporting in This is Money citing The Times. Pension industry experts expressed concern that the arrangement could create 'cliff edges' and be seen as unfair by those who saved for retirement in addition to the state pension. More specific details, including how many pensioners will be affected, have yet to be confirmed by the Treasury.

How it is being reported

• Healey’s state pension shield could create ‘messy £200m cliff edge’The Treasury’s plans to shield low-income pensioners from income tax could lead to a “messy” cliff edge and a ballooning bill for future governments, a former pensions minister has warned. Chancellor John Healey will use his maiden Autumn Budget this week to protect nearly one million retirees who are dependent on the state guarantee by [...]City AM · 26 Oct, 11:35
• Chancellor set to exempt poorest state pensioners from income tax in BudgetThose who earn even £1 in private pension above their state pension look set to be excluded from the new tax rate.This is Money · 26 Oct, 11:13
• Healey to shield low-income pensioners from income tax in the BudgetChanges are needed to prevent the full, flat-rate state pension becoming liable for income tax after it rises in April.BBC Politics · 26 Oct, 09:47

In this story: John Healey · Labour · Conservative · Reform UK

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